Insight

Using number validation in combination with ATM location, banks are able to establish a more precise fraud protection system.

August 19 2015

4 minutes read

With cardholders now travelling and transacting internationally more than ever, financial institutions around the world are faced with the need to constantly upgrade their fraud detection systems and devote considerable attention to credit card transactions attempted or performed abroad.

Fraud departments established in large banks have developed mechanisms to protect cardholders and their bank accounts from unauthorised access, abuse and identity thefts.

Sometimes they will block a credit card transaction if it is attempted from outside the holder’s country of residence, or in a country where the cardholder has never made a transaction. In many instances fraudulent credit card activities are attempted overseas, and blocking suspicious transactions is the standard procedure.

Although this is done for valid security reasons, it can cause great inconvenience for cardholders. If the transaction attempt was legitimate (a business trip, holidays in a foreign country) and the bank still blocks the card, the client will experience difficulties.

To prevent this, some banks have installed a notification system enabling cardholders to pre-notify the bank about their travel dates abroad. Any card transaction attempted on those dates can be marked non-risky, and allowed by the bank.

Although the system is intended to protect cardholders, it also represents an inconvenience requiring them to make that extra step for the sake of security. So it comes as no surprise that many cardholders still won’t notify their bank of the dates they’ll be travelling abroad.

In these cases, the fraud department has no way of knowing if the card transaction attempted abroad is indeed a genuine one, or an indication of fraud. This can result in blocking legitimate transactions and inconvenience the cardholder. In some cases this is also accompanied by complaints and damage to client relationships.

Number validation, a telecom resource which integrates easily with any core IT system, allows banks to determine if a mobile number is roaming, and use the insight to assess the risks of fraud more accurately.

In cases when a card transaction was attempted abroad, number validation determines if the cardholder’s mobile number is in roaming, which is a good indication of whether a transaction is legitimate or not.

By using number validation in combination with the location of the ATM where the transaction has been attempted, banks are able to introduce an additional check point before blocking the credit card, and establish a more precise fraud protection system.

Instead of blocking the card immediately, an SMS notification can be triggered and sent to the cardholder, asking them to reply “YES” if the transaction is legitimate (and therefore safe for the bank to allow), or “NO” if not (i.e. a fraud is in process, and the registered cardholder is not the person attempting to make the transaction).

Professional 2-Way SMS service enables this procedure through seamless integration with any type of core back-end system, which can then be easily combined with number validation.

Once implemented, the entire logic can be executed automatically, without further administration or setup. The service comes with consultancy, integration assistance and specialised 24/7 engineering support, speeding up your service rollout and time to market.

Fundamentally, this extra layer of security is obtained using the mobile phone – the one device that all cardholders have and use, wherever they are. The solution does not depend on internet connectivity, which ensures message delivery regardless of data connection availability abroad.

All of this results in a more accurate assessment of risk associated with credit card transactions performed abroad and less damage to client relations. A more precise way of blocking fraudulent transactions lowers the number of complaints made by cardholders.

A growing reliance on mobile phones, demands for convenience, an increased focus on ease of use – these trends are also shaping cardholders’ expectations. Perfecting security procedures without damaging user convenience remains a lasting challenge for credit card companies and banks alike.